Finally, Someone Stands Up to the Big Banks . . .

A few weeks ago I wrote a post about the $285m “settlement” agreed to by CitiGroup in a judgement brought against it by the SEC for misleading clients in a $1Billion collateralised debt obligation (CDO) linked to sub-prime residential mortgages.  Basically the bank packaged up crappy mortgages, sold it to their customers as an investment, and then bet against the fund, knowing it would turn worthless.  Sounds more like a casino and a rigged roulette wheel than your trusted bank!

Anyway, the clients who bought the CDOs lost $700m while Citi make $160m in fees and trading profits.  Do you smell a rat yet?  It gets better.  The “settlement” to which Citi and the SEC mutually agreed was a $285m fine (taxpayers bailout money?) along with the understanding, as is custom in such settlements, that Citi is neither admitting or denying any wrongdoing.

I went slightly nuts when I read this, and now it looks like a New York judge, Jed Rakoff is finally taking a stand against the big banks and their cozy relationship with the SEC.  Judge Rakoff struck down the $285m settlement, arguing that “the deal touches on the transparency of financial markets, whose gyrations have so depressed our economy and debilitated our lives, that there is an overriding public interest in knowing the truth.” Citi now has to go to trial in New York instead of getting away with its previous fine and a quick cover up.

To me, this incident of someone in authority finally standing up against the big banks and their insider relationship with the Fed and the SEC might just represent the tip of the iceberg.  As more and more is revealed about the role of the banks, the Fed and the SEC in the recent global financial crisis, the ugly truth seems to be hard to keep in the closet. And with the global Occupy Wall Street protests forcing all citizens to take an honest look at how their governments and financial institutions are behaving, the pressure for real reform is mounting.

I recently read a very thorough article in Bloomberg News on the past behaviour of the big banks and governmental financial institutions exposing much of this mutual back scratching relationship. Secret Fed Loans to Struggling Banks.  It makes the Citi OCD deal look like penny poker.  And it looks like Congress is getting in on the investing game as well with the recent investigations of Congressional “insider knowledge” trading.

Time for real reform?  One thing I am certain of, if there is another financial meltdown, there will be no government bailouts of the banks, not in the current climate of voter mistrust.

Tight Lines . . .

John R Childress

E | john@johnrchildress.com      T | +44 207 584 3774      M | +44 7833 493 999

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
This entry was posted in corporate culture, John's views on the world, the business of business and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s